In this edition of Watchlist Wednesday, we highlight five of the top stocks qualifying for the Net Current Asset Value (NCAV) screen.
NCAV is a stock-selection strategy developed and implemented by Benjamin Graham as discussed in "Security Analysis" and "The Intelligent Investor."
Warren Buffett (Trades, Portfolio) nicknamed it the "cigar-butt approach" because “a cigar-butt found on the street that has only one puff left in it may not offer much of a smoke, but the ‘bargain purchase’ will make that puff all profit.”
The screen finds stocks trading for less than the difference between current assets minus total liabilities. There is no regard given to the company’s long-term assets or future profits.
Here is a breakdown of the five stocks with the lowest price to NCAV as found on TheStockMarketBlueprint.com:
- China Green Agriculture Inc. (CGA, Financial):Â China Green Agriculture, through its subsidiaries, engages in the research, development, production, distribution and sale of various types of fertilizers and agricultural products. The company markets its fertilizer products to private wholesalers and retailers of agricultural farm products in 27 provinces, four autonomous regions and three central government-controlled municipalities in China. It also develops, produces, and sells flowers, green vegetables, fruits and colored seedlings; which it sells to flower shops, luxury hotels, government agencies, supermarkets and upscale restaurants. China Green Agriculture also exports its products through contracted distributors to India and Ghana. The company is based in Xi'an, China.
- Current assets: $331.44 million
- Total liabilities: $64.37 million
- Total shares: 36.93 million
- Net current asset value/share: $7.23
- Current price: $1.26 (closing price on April 5)
- Price/NCAV: 17.4%
- SORL Auto Parts Inc. (SORL, Financial):Â SORL Auto Parts develops, manufactures and distributes automotive brake systems and other safety related auto parts. It operates in two segments, Commercial Vehicle Brake Systems and Passenger Vehicle Brake Systems. Its products are principally used in various types of commercial vehicles, such as trucks and buses. SORL Auto Parts markets its products under the SORL brand to automotive original equipment manufacturers and the related aftermarket. The company was founded in 2003 and is based in Rui'an, China.
- Current assets: $267.98 million
- Total liabilities: $120.39 million
- Total shares: 19.30 million
- Net current asset value/share: $7.67
- Current price: $1.67 (closing price on April 5)
- Price/NCAV: 21.8%
- Emerson Radio Corp. (MSN, Financial) Emerson Radio, together with its subsidiaries, designs, sources, imports, markets and sells various houseware and consumer electronic products in the U.S. and internationally. It provides houseware products, audio products, and miscellaneous electronic and novelty products. The company offers its products primarily under the Emerson brand name; and licenses its trademarks to others on a worldwide basis for various products. Emerson Radio markets its products primarily through mass merchandisers. The company was founded in 1948 and is headquartered in Hackensack, New Jersey. Emerson Radio operates as a subsidiary of S&T International Distribution Ltd.
- Current assets: $59.95 million
- Total liabilities: $3.22 million
- Total shares: 27.13 million
- Net current asset value/share: $2.09
- Current price: 85 cents (closing price on April 5)
- Price/NCAV: 40.7%
- Richardson Electronics Ltd. (RELL, Financial) Richardson Electronics engages in electron devices, customized display solutions and healthcare equipment businesses in North America, the Asia Pacific, Europe and Latin America. The company was founded in 1947 and is headquartered in LaFox, Illinois.
- Current assets: $138.76 million
- Total liabilities: $24.21 million
- Total shares: 2.14 million
- Net current asset value/share: $10.31
- Current price: $5.13 (closing price on April 5)
- Price/NCAV: 49.8%
- Ever-Glory International Group Inc. (EVK, Financial) Ever-Glory International Group manufactures, distributes and retails apparels primarily in China, the U.S., Europe, the United Kingdom and Japan. It operates through two segments, Wholesale and Retail. The company primarily offers casual wear, outerwear, and sportswear for men, women, and children. The company offers its woman apparel under the LA GO GO, Velwin and Sea To Sky brands.Â
- Current assets: $200.60 million
- Total liabilities: $149.93 million
- Total shares: 14.78 million
- Net current asset value/share: $3.43
- Current price: $1.83 (closing price on April 5)
- Price/NCAV: 53.4%
Late in his life, Benjamin Graham estimated that the NCAV strategy earned him an average of 20% per year over 30 years. You can implement this strategy by regularly investing equal amounts in the qualifying stocks with the lowest prices in relation to net current asset value.
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Mitchell Mauer is the Founder of TheStockMarketBlueprint.com. The Stock Market Blueprint is a free site that finds value stocks for investors building long-term wealth. The site’s investment philosophy is anchored in principles established by Benjamin Graham and his most reputable followers over the last 100 years.
This article appeared first onÂ The Stock Market Blueprint blog.